Chain Drug Review, June 3, 2019

THE BUSINESS OF CBD ROUNDTABLE Perspectives on the CBD Boom Some of the key issues facing participants in the CBD category were discussed during a roundtable at a recent ECRM event WOLDT The CBD market is at an inflection point with both CVS and Walgreens deciding to take the plunge and get into the category One can argue that the market is ahead of legislators and regulators So I think it would be good to begin the discussion by trying to get a handle on the legal landscape Nolan could you fill us in on where things stand at the federal level and although we really dont have time to delve too far into this perhaps provide a sketch of how things vary from state to state JACKSON What Im going to focus on is hemp because thats really where my practice is and ultimately I think it would be helpful to get into the discussion of what is hemp versus marijuana versus cannabis in general and then we can talk about CBD derived products as well But Ill focus on the laws for hemp For a long time the United States was thought of as an importer of hemp only and thats been the case since about 1937 because the controlled substances laws in this country criminalized hemp Not specifically but as part of the definition of marijuana in the Controlled Substances Act So until about 2014 when the laws started to change domestically it was illegal to grow and cultivate hemp in this country A lot of the hemp products that made it into this country were imported from Canada Western European nations China as well Theyve been growing hemp for a long time as the United States has but again it was illegal to domestically grow that crop in the United States until 2014 Thats when the 2014 Farm Bill was reauthorized and the Agricultural Pilot Program construct that some of you might be familiar with was developed And under that construct states through their departments of agriculture could develop agricultural pilot programs for research purposes for growing hemp and a number of states did so About 41 states authorized Farm Bill compliant agricultural pilot programs Theres pending legislation in a number of other states to bring that number up but it stands at 41 As part of the 2014 Farm Bill some appropriations laws were passed at the federal level which prohibited federal agencies from enforcing against hemp grown as part of the 2014 Farm Bill In other words if a state like Kentucky where Im from for example grew hemp legally under the 2014 Farm Bill that hemp could move freely in interstate commerce as a matter of federal law and agencies like the DEA Drug Enforcement Administration and FDA Food and Drug Administration couldnt enforce against it That was under the 2014 Farm Bill and the appropriations laws that were enacted after that The laws changed again recently and Im sure youre aware of the 2018 Farm Bill and exactly what that does and its important because it addresses a problem that the previous laws didnt None of the laws removed hemp from the federal Controlled Substances Act That didnt occur until December of last year when President Trump signed the 2018 Farm Bill into law That bill does a few important things Primarily and whats important for our discussion today is hemp is no longer federally illegal as a matter of federal law Hemp as been removed specifically from the Controlled Substances Act as have THCs present in hemp So hemp grown as part of the 2018 Farm Bill hemp imported into the United State legally its all federally legal so long as its THC concentration is 03 or less It doesnt distinguish where that hemp has to come from and thats an important legal distinction It can be imported legally it can be grown in this country and as long as its THC concentration is 03 or less its federally legal Now what the federal law doesnt do is preempt state law States can still choose to enforce against hemp differently In fact the 2018 Farm Bill explicitly contemplates that states can impose restrictions that are greater than the 2018 Farm Bill So under these agricultural Panelists discuss issues related to CBD pilot programs under these new regulatory plans that are going to come into existence when we get some clarification from the USDA U S Department of Agriculture states can take different approaches and a number of states already have There are 41 states which I already said have the pilot programs and there are a number of different legal regimes There arent 41 different legal regimes but there are different legal regimes So states are doing this differently at the state level and even at the local level The 2018 Farm Bill also does not amend other federal legislation So the Federal Food and Drug Act and its provisions continue to exist and thats why weve seen some of the confusion in the marketplace that we have because the FDA still retains jurisdiction over ingestible products and topical products even though they might contain federally legal hemp and I think that moves us into the discussion thats going to occur later on this evening There is still significant confusion about what federally legal hemp means under federal law and even though its been removed from the Controlled Substances Act the FDA still controls it WOLDT Barbara I know that Fruth has had some experience with this You operate in three states and as you tried to get into the CBD category you encountered three different responses from those states Maybe you could tell us a little bit about that TAYLOR Our stores are in Ohio West Virginia and Kentucky and at one point we did have product in West Virginia and Ohio and were doing quite well with it We had some good partners and manufacturers there Ohio Board of Pharmacy came in one of our locations told us we had to remove the products and take them to a dispensary to be destroyed At that point Ohio did not have any dispensaries up and running So luckily we got all our products over to the West Virginia side of our operation Unfortunately the Board of Pharmacy in West Virginia decided that we should not sell in the pharmacy setting So CBD products had to come out of PANELISTS JOAN DRIGGS Vice President of Content and Thought Leadership IRI NANCY DUITCH Founder and Chief Executive Officer Sera Labs NOLAN JACKSON Attorney Frost Brown Todd MAUREEN MALDARI Cofounder and Chief Executive Officer The BAM Connection DOUGLAS MACKAY Senior Vice President of Scientific and Regulatory Affairs CV Sciences ART MASSOLO Chief Business Development Officer Mile High Labs BARBARA TAYLOR Category Manager Fruth Pharmacy JEFFREY WOLDT Vice President and Editorial Director Chain Drug Review Continued on page 8 6 The Business of CBD June 3 2019

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